AlterNet: IMF's "Pro-Growth" Policies Killing Gains in Developing World

[marmar]

IMF's "Pro-Growth" Policies Killing Gains in Developing World

By Mark Weisbrot, AlterNet. Posted October 18, 2007.


The dirty secret is that income growth was stronger before the era of "globalization."



Finance ministers, bankers, and businessmen will gather in Washington DC this week for the annual Fall Meetings of the International Monetary Fund and World Bank. As is customary, the IMF is publishing its analysis of the world economy, and this year it has released some research that is sure to cause controversy and provide some fuel for its critics.

The IMF found that foreign investment and technology (but not trade) were associated with an increase in inequality in developing countries.

But there is much less here than meets the eye. What the Fund has missed - and has pretended not to notice for the last quarter century - is a much more profound change in the world economy that has accompanied the set of economic reforms, including "globalization," that the Fund has forcefully advocated. Over the last twenty-six years there has been a sharp slowdown in the growth of income per person in the vast majority of low-and-middle income countries (PDF).

As would be expected when growth rates fall off, these countries have also seen substantially reduced progress on major social indicators, including life expectancy and infant and child mortality.

The Fund is taking advantage of the generalized lack of knowledge of economics and economic trends among its audience. Although the distribution of income gains is an important determinant of economic and social well-being, if income does not grow, then there is nothing to distribute. In a country as rich as the United States, one could argue about how much we might reduce poverty and unemployment, and improve the quality of life through redistribution and policy changes such as universal health care - although politically it is generally more difficult to accomplish much in these areas if the economy is stagnating. But, for the poorest countries, increasing productivity is a matter of survival, and for developing countries generally it is a necessity if they are going to be able to provide education and health care to their citizens.

Especially these days, as countering global climate disruption takes its rightful place as an urgent priority, economic growth is often seen as a problem rather than a solution. But increasing productivity - and that is basically what we are talking about when economists refer to growth in income or GDP per person - is not inherently environmentally destructive. The Internet, for example, has increased productivity while expanding the potential for environmentally-positive outcomes through telecommuting and reduced paper usage. At a more basic level, technical, organizational, and distributional changes - including land reform, and the provision of credit and seeds -- that allow poor farmers to produce more food per acre and per labor hour are also not necessarily environmentally destructive. Growth is also what the IMF and its affiliated institutions have promised that their policies would deliver - not redistribution. All the pain and "creative destruction" associated with privatizations, indiscriminate opening to trade and capital flows, more restrictive monetary and fiscal policies, and other generally unpopular reforms were supposed to increase economic growth. .....(more)

The complete piece is at: http://www.alternet.org/audits/65540/

[Igel]

1. I'm being a cur.

Post hoc and half-truth reasoning. Bleah, two for one fallacy day.

There are a lot of possible reasons for the decrease in income growth. The only thing he points out is that there's a correlation, ignores other possible excuses.

Could a quick increase, fixing easy problems, lead to a quick but unsustainable growth (it's easy to get impressive growth rates when you start with small numbers)? Could reduced investment in the last 5 years have triggered a downturn (the numbers, of course, are available and would nail his point, but since he doesn't bother citing them one has to wonder if they wouldn't instead stake his point through the heart)? Could some of it be due to corruption or HIV in Africa?

What percentage of the decrease in growth is attributable to globalization? He wants us to assume a large percentage, but he doesn't actually bother to make the point. Bogey-men are much scarier when they're in the dark and under the bed.

"The Fund is taking advantage of the generalized lack of knowledge of economics and economic trends among its audience." And others are merrily following their example.